Here is a prequel to
The Vampire Squid Strikes Again: The Mega Banks' Most Devious Scam Yet

Goldman, JP Morgan Have Now Become A Commodity Cartel As They Slowly Recreate De Beers' Diamond Monopoly
Submitted by Tyler Durden on 06/16/2011 23:57 -0400


About a month ago we reported on an inquiry launched into JPM's "anti-competitive" and "monopolistic" practices on the LME which have resulted in artificially high prices for a series of commodities which had been hoarded by the Too Big To Fail bank. Today, the WSJ continues this investigation into a practice that is not insular to JPM but also includes Goldman Sachs and "other owners of large metals warehouses" which can simplistically be characterized as a De Beers-like attempt to artificially keep prices high for commodities such as aluminum, courtesy of warehousing massive excess supply, artificially low market distribution of the final product, while collecting exorbitant rents in the process
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The primary driver of this anti-competitive behavior is the fact that GS, JPM and Glencore now control virtually the entire inventory bottlenecking pathways: "In recent years, major investment banks like Goldman and J.P. Morgan and commodities houses like Glencore have been snapping up warehouses around the world, turning the industry from a disperse grouping of independent operators into another arm of Wall Street. The LME has licensed about 600 warehouses around the world. The transformation has raised questions about whether the investment banks, which also have big commodity-trading arms, are able to use their position as owners of warehouses to manipulate prices to their advantage."
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While the obvious purpose of "warehousing" is nothing short of artificially bottlenecking primary supply, these same warehouses have no problem with acquiring all the product created by primary producers in real time, and not releasing it into general circulation: once again, a tactic used by De Beers for decades to keep the price of diamonds artificially high. But unlike De Beers, Goldman also gets to charge rental fees once demand delivery instructions are sent out. The rent ends up being substantial due to the firm's unwillingness to release handily available product to the market in due course:
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Lots More:
http://www.zerohedge.com/article/goldman...iamond-monopoly